Brexit Deal Or No Deal, Food Bills Are About To Get A Lot More Expensive
With just a few days until the end of the transition period, and with British freight hauliers temporarily banned from travelling to France, we still don’t know if a free trade deal will be struck between the UK and EU.
Yet, even if a deal can be agreed and approved before 1 January 2020, British consumers need to prepare for the fact that their shopping bills are about to get a lot more expensive.
Although a respectable 52% of the UK’s food needs are currently met by domestic production, the remainder is heavily dependent on imports from the 27 European Union (EU27) countries. About 29% of the food consumed in the UK comes from the EU27 compared to just 4% each from the regions of Asia, Africa and the Americas
The UK’s reliance on the EU is especially acute in the horticulture sector, with about 40% of vegetables and 37% of fruit sold in the UK imported from EU countries.
At this time of year, outside of the British growing season, the country’s dependence on Europe is even more stark, with practically all of tomatoes, lettuces and soft fruit coming from the Netherlands and Spain.
Just how this trade will be affected will depend on the outcome of the current negotiations. A no-deal scenario clearly poses the biggest challenge.
The UK would be legally required to apply the same tariffs on EU goods as for other World Trade Organisation (WTO) members with which it does not have a free trade agreement.
These tariff rates vary between different foodstuffs and are generally quite low for fresh fruit and vegetables (typically around 10%), high for drinks and beverages (20%) and even higher for meat and dairy (up to or higher than 40%).
Research suggests that the tariff effect of no deal would lead to food price inflation of an estimated 3.1% for fruit and 4.0% for vegetables.
Just how much of this additional cost would be passed on to the consumer is yet to be seen, since retailers may prefer to absorb it or, more likely, attempt to pass it onto their suppliers.
Although these tariffs would only be applicable in the event of no deal, the same can’t be said for other Brexit costs that businesses and consumers will incur in 2021, even with a deal.
These so-called 'non-tariff barriers' come in the form of extra red tape, including customs and rules of origin declarations, as well as checks on plant and animal imports.
One frustrated industry association leader in October 2020 shared their thoughts:
As one frustrated industry association leader told us in October, whatever deal the UK strikes will create additional costs and delays for the fresh fruit and vegetable sector. They pointed out a lack of preparedness around “just in time” supply chains.
An additional concern is the UK’s Smart Freight IT system, which is designed to prevent traffic chaos by ensuring haulage trucks have the correct paperwork before they arrive at ports. But it won’t be ready in time for the end of the transition period.
The consequences of this failure - which will be felt mostly at the Dover-Calais artery where most imported food is landed - could spark the suspension in January 2021 of perishable foods transport by UK and EU companies.
Even short time delays of a few hours, coupled with the additional cost of doing business outside of the Single Market and Customs Union, will cascade through the UK’s just-in-time supply chains.
Indeed, the current travel restrictions may be a portend of what cross-channel trade could look like in early 2021, with UK supermarkets already warning of possible food shortages.
Fresh fruit and vegetables are perishable and any delay will reduce shelf-life and lead inevitably to more food waste. It is consumers who will ultimately be picking up the bill for this in the form of reduced choice and high prices.
Because affordability is the major determinant of consumer behaviour, food price inflation is likely to drive down demand for fruit and vegetables - especially by low income households - at a time when the government really ought to be sending the very opposite signal.
Not least, since unhealthy diets have proved a key risk factor during the COVID-19 pandemic.